Chapter 16: Ethics, sustainability and corporate responsibility

Question 1

What are the ethics in business?

Answer 1

Ethics within a business can be deemed to occur on 3 levels.
These different levels of ethics can help to identify ethical issues from a scenario

• Personal ethics - Relate to the way in which individuals conduct themselves. This may include professional ethics (for an ACA).
• Business ethics – The way the firm as a whole behaves and whether it lives up to society’s expectations.
• Corporate responsibility – The belief that a firm owes a responsibility to society and stakeholders.

Question 2

What are the ethical tests in the exam? What should you consider?

Answer 2

These three tests can help you to identify and explain ethical issues in the exam:
- Transparency: Does the company mind others knowing about its decision?
- Effect: Whom does the decision hurt? Are one or more stakeholder groups receiving a negative outcome?
- Fairness: Would the company’s decision be considered fair?

The following other issues should be considered:
 Legality
 Confidentiality
 Sustainability
 Honesty.

Question 3

What is sustainability? What are the three main issues to consider?

Answer 3

Sustainability is the ability to meet the needs of the present without compromising the ability of future generations to satisfy their own needs.

This is a wide concept and is not limited to ‘green’ issues. There are three main types of issues to consider:
- Social: e.g. negative impact on society, low paid workers, lack of diversity
- Environmental: e.g. pollution, use of sustainable resources, climate change
- Economic: e.g. economic stability, impact on local economy, provision of job

Question 4

What is natural capital?

Answer 4

This considers the natural assets of the planet that provide the resources required by people and organisations to survive. These include timber, land, fisheries, energy and freshwater.

Increased focus on natural capital has moved businesses to improve their monitoring and reporting of the impacts of their operations.

This allows greater transparency and allows more informed business decisions.

Question 5

What is corporate responsibility and how do you achieve it?

Answer 5

Corporate responsibility is a belief that a firm owes a responsibility to society and stakeholders.

Achieving corporate responsibility
A firm with good CR goes beyond its minimum contractual obligations to its stakeholders.
 The benefits of good CR are that this may help to gain good publicity for the business.
 The risks of poor CR are long-term damage to the reputation of the business caused by upsetting customers or receiving negative publicity.

Question 6

What are some potential corporate responsibility issues?

Answer 6

CR issues could include:
 Health and safety
 Protecting the environment
 Staff welfare
 Customer welfare
 Using fair trade suppliers
 Charitable giving.